Intermediate Accounting Chapter 4

Name Chapter 4--Profitability Analysis
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Instructions

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Question 1

Multiple Choice

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One important difference between return on assets (ROA) and return on common shareholder’s equity (ROCE) is
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ROA does not differentiate based on how a company finances its assets, ROCE does.
ROA does not distinguish between the different types of income items, such as income from continuing operations, discontinued operations, extraordinary items and changes in accounting principles, ROCE does.
ROCE does not distinguish between the different types of income items, such as income from continuing operations, discontinued operations, extraordinary items
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10.32
8.90
2.51
6.23
8,026,450 / [ (1,320,150 + 1,254,600) / 2] = 6.23
8,026,450 / [ (1,320,150 + 1,254,600) / 2] = 6.23
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Question 17

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Net Devices Inc.
The following balance sheets and income statements are for Net Devices Inc., a manufacturer of small electronic devices, including calculators, personal digital assistants and mp3 players. For purposes of these questions assume that the company has an effective tax rate of 35%.
ASSETS (in thousands)
Fiscal year end
Cash
Marketable securities
Receivables
Inventories
Other current assets
Total current assets
Property, plant & equipment
Intangibles
Deposits & other assets
Total assets

2007
$ 875,650
6,560
771,580
1,320,150
249,000
3,222,940

2006
$ 571,250
0
775,250
1,254,600
231,200
2,832,300

2005
$ 154,230
0
902,000
1,418,500
229,900
2,704,630

1,118,750

1,100,300

1,122,400

263,050